Proper estate planning should help ensure that your heirs receive your property. However, sometimes assets remain after an executor has finished distributing the estate to beneficiaries. These leftover assets make up a residuary estate.
The problem with a residuary estate is that state intestacy laws often take over, so you do not have control over who ends up with your leftover assets. Residuary estates can form for different reasons.
Failure to account for assets
Sometimes people forget to list property in a will and never write an updated will to include the missing assets. Also, you may acquire valuable property since you last wrote your will and fail to modify your will with a codicil to describe your wishes regarding your new property.
No heirs or beneficiaries
It is possible that property you cover in a will ends up in a residuary estate anyway. A beneficiary could die before you and there is no backup heir to receive the property. Also, your insurance policies or other pay-on-death accounts may become part of a residuary estate if a listed beneficiary dies or if you fail to list beneficiaries on the account to begin with.
Preventing a residuary estate
The good news is that estate planning can help you avoid leaving leftover assets. Updating your will to account for new assets is one option. However, a blanket statement that simply leaves your remaining assets to one or more beneficiaries might be enough to cover your residuary estate. Some people also use a pour-over will to place their residual assets in a trust.
While these steps may take time and effort, they could help you realize your estate wishes and prevent problems for your heirs.